Wednesday - September 26, 2007
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1. ZACKS RANK BUY STOCKS
Zacks #1 Rank stocks average a 32% annual return. Every day on Zacks.com we highlight four new Zacks Rank Buy stocks. Each individual stock is chosen based on how well they match the criteria for the four main schools of investing: Aggressive Growth, Momentum, Growth & Income and Value.
Aggressive Growth - FMC Technologies, Inc. (FTI)
FMC Technologies, Inc. (FTI) recently won a multi-billion
dollar contract with Statoil ASA, which shows management's
ability to execute. Over the past two quarters, the company
has posted an average positive surprise of 9.9%. Over the past
60 days, this year's earnings estimates have increased seven
cents to $2.15 per share. Analysts expect earnings to grow
22.5% in 2008 and 25% over the long term. Read the analysis of FTI now!
Growth & Income - Deere & Company (DE)
Deere & Company (DE) , which was last presented as a Growth &
Income pick on Jun 26, has returned over 20%. DE exceeded
analysts' earnings expectations in eight consecutive quarters
by an average margin of 15.4%. After reporting record third-
quarter results, the company upped its full-year profit
outlook. On Aug 29, the Board of Directors increased its
quarterly cash dividend by 14% to 50 cents per share of common
stock from 44 cents. This Zacks #1 Rank stock is currently
yielding 1.2%. Read the full analysis on DE now!
Momentum - Aftermarket Technology Corporation (ATAC)
Aftermarket Technology Corporation (ATAC) reported a robust
second quarter and guided higher for the year. The company's
Logistics segment is driving earnings growth. Over the past 90
days, this year's earnings estimates have increased five cents
to $1.70 per share. ATAC has averaged a 26.5% positive
surprise over the past three quarters. Analysts expect
earnings to jump 19.6% in 2008. Read the analysis of ATAC now!
Value - TBS International Limited (TBSI)
TBS International Limited (TBSI) beat the Street's earnings estimate for the past four quarters by an average margin of 32.1%. In early August the company reported strong second- quarter and year-to-date results. Consensus earnings estimates for both this year and next year have been trending higher. This Zacks #1 Rank stock is currently trading at a valuation of 14.8x current fiscal-year estimated earnings and at 9.8x next fiscal-year estimated earnings. Read the full analysis on TBSI now!
2. SCREEN OF THE WEEK
Zacks.com offers three unique weekly commentaries that all
further our mission to help you Profit from the Pros. Today is
the latest installment of Screen of the Week from Kevin Matras.
Each week, Kevin shares with you another winning screen he has
discovered using the Research Wizard software from Zacks
Investment Research. Learn more about the Research Wizard.
"The Short Ratio"
This week's Screen isn't so much a screen, but rather a look at how using a market sentiment item can help find new stock picks.
The item is called the `short ratio'.
The short ratio is the number of shares sold short (short interest or bets that the stock will go lower in price) divided by the average daily volume. This is also sometimes referred to as the "days to cover" ratio because it tells approximately how many days it will take short-sellers to cover their positions if good news sends the price higher.
The higher the ratio, the longer it would take to buy back the `sold' (borrowed) shares. And in theory, the more short positions there are to cover, the stronger the short covering rally would be.
Many people who use this indicator like to look for the number of "days to cover" to be higher than 8-10 days. It's generally believed that a short ratio of that size could prove difficult to cover and therefore trigger a strong rally on any hint of an upswing. (My personal preference is to take that into consideration, but also compare it to the industry's average ratio and the stock's own historical ratio.)
And while I wouldn't recommend using just the short ratio as the `be all and end all' of screening items, I do think it can be a great tool to help define great opportunities.
For example; sometimes when I'm looking for stocks that have been in a lengthy consolidation, I'll look for those stocks with high short ratios.
Because consolidation ranges are basically areas of market indecision. Bets are being made by both bullish and bearish investors. So finding stocks that are going back and forth near their price highs with a growing short ratio shows that ever-increasing bets are being made on prices going lower.
However, if the stock breaks out to the upside, properly positioned bulls will more than likely add to their winnings ... undecided traders will now be convinced to get long ... and shorts will have to scramble to cover their bearish bets. This can be an explosive situation.
This can be used quite effectively for bottom fishing too.
Granted, with the market doing awesome over the last four months, nobody's really thinking about that. But when the time comes, this can be a great way to find some great turnarounds.
When a stock is getting battered and pundits are wrangling over whether it's the bottom or not, you should pay close attention to the short ratio.
Of course, there has to be a reason for a stock to move higher. So seeing an improving fundamental outlook is important.
But when lopsided market sentiment seems to be at its worst (reflected in investors' buying and selling) the short ratio can be just the thing to uncover extremes.
For example: for beaten down stocks you can search for companies near their 52 week lows with increasing short ratios. Or better yet, look for short ratios above their average values or even ones that are at (or near) their two year highs.
For stocks moving higher, try looking for historically high short ratios for stocks up 20% or more (new uptrend) or that have just rallied past an important moving average like the 50 or 200-day average. (Funds will often pile in at those points. So a large short ratio could propel the market significantly higher as huge buyers bid the market up while panicky shorts chase it even higher just to get out.)
A screen I'm currently running looks for stocks that are:
Here are three of the companies that made the list this week (9/25/07):
BCE BCR, Inc.
Try using the short ratio in some of your current screens and see if it doesn't give you a greater edge and keener insight into what's really happening in your stocks.
This item isn't available in all screeners (especially the historical values and industry values), but it is available in the Research Wizard
And remember the key to successful screening is in discovering those screens that have produced profitable results in the past. And that's exactly what you get with the powerful Screening and Backtesting ability of Research Wizard. Click Here.
Disclosure: Officers, directors and/or employees of Zacks Investment Research may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material. An affiliated investment advisory firm may own or have sold short securities and/or hold long and/or short positions in options that are mentioned in this material.
3. ZACKS EQUITY RESEARCH
As we continue to look globally for new areas in which to diversify our portfolios in these uncertain times, some advice from Zacks senior European insurance industry analyst Duong Vuong, CFA came in handy. He was able to tell us what to look for from the insurance companies he covers.
You cover some of the main European insurers. How are things looking for these companies lately?
In the property/casualty insurance segment, sharp premium rate increases in the past few years have translated into strong increases in premiums and underwriting income, which we are now witnessing in the companies' results. However, with higher profitability due to higher premiums and benign losses, the industry's capital has built up. This should lead to increasing pricing competition going forward, particularly with the moderate loss trends on both the commercial and personal sides. Slower premium growth will eventually translate into slower earnings growth for the industry.
More. . .
Are things different on the life insurance side?
Our outlook for the life segment is slightly more positive, especially for the companies that sell variable life and annuity products. The relatively low interest rates are favorable for the margins of fixed-income products.
Is there lots of U.S. exposure for some of the main European insurance companies?
Some of the companies in my coverage are significant players in the U.S., such as Aegon, N.V. (AEG). In fact, the Americas - the U.S. and Canada - accounted for 60% of income last year. The Netherlands, which is where the company is based, contributed just 29%.
Is this a good thing or a bad thing for a company like Aegon?
The sagging U.S. dollar has a positive effect on the sales for Aegon. Further, as Aegon is focusing mostly on life insurance, its position in the market is more favorable compared to non-life insurance companies.
Dirk van Dijk, CFA is the Director of Zacks Equity Research.
Real-time market insights from Zacks Equity Research Analysts. Stocks featured recently include Pool Corporation (POOL), ASM Int'l (ASMI), Radio One (ROIAK) and Arkansas Best (ABFS). To see their latest posts, click here.
Listen to the audio podcast for the Earnings Preview through Zacks' NEW Audio Feature
Listen to the audio podcast for the Earnings Trends through Zacks' NEW Audio Feature.
While there have been fewer estimate revisions overall, most of them recently have been cuts. More...
4. ZACKS WEALTH MANAGEMENT
Every week, Zacks Wealth Management provides informative articles on how to build and protect wealth. Todayís topic is:
Although we talk about accumulating wealth in your retirement accounts, many of you have on one occasion or another needed to tap in to your traditional IRA in times of emergency or to help out family members. Of course, when you are 59 1/2 , it's not an issue. Circumstances may arise, however, before you turn 59 1/2 10% penalty tax on funds you draw out.
The 10% penalty, however, can be avoided in the following circumstances:
Let's focus on three of these scenarios: the qualified higher education expenses, using proceeds for your first home, and Roth IRA distributions. More information is available in IRS Publication 590.
Qualified higher education expenses
You may withdraw penalty free from your IRA if these proceeds are for higher education expenses. Who could this money be used for? The proceeds can be used for you, your spouse, your children and your grandchildren.
Eligible expenses include tuition, fees, books, and equipment needed to attend an eligible educational institution. An eligible institution is any college, university, vocational school, or postsecondary schools that participate in a student aid program administered by the Department of Education.
Please note that if you have funds in a Roth IRA, earnings above your contributions will be taxed whether or not you've held the monies in the Roth for 5 years or not.
You may withdraw your IRA penalty free to buy, build, or rebuild your first home. Two things you must remember are:
Keep in mind that you are limited to $10,000 and this is a lifetime limit. Anything above the $10,000 will trigger the 10% penalty. Remember that you and your spouse can each use this $10,000 exception. So if and your spouse have funded IRAs you could take out a total of up to $20,000 towards that down payment.
Remember that you are considered a first time home buyer if you have not had a present interest in a home for two years. If you are married, your spouse also needs to meet this requirement.
If you have a Roth IRA, the five year holding period applies. If you have held the funds in a Roth less than five years, earnings you withdraw will be taxed.
Roth IRA distributions before 59 1/2
Since Roth IRA contributions aren't tax deductible you may draw out funds you contributed tax free and penalty free before 59 1/2 . Any earnings you draw out above your contributions may be taxed and penalized 10%. For example, you contribute $10,000 and your account went up to $12,000. If you take out $10,000, you pay no taxes or penalties. Take out $12,000, you will be taxed and penalized on $2,000(the amount above $10,000)
Keep in mind that if you are 59 1/2 or older, anything you've held five years or more, either earnings or contributions, can be withdrawn penalty free and tax free.
There are many ways to tap into your IRA penalty free. Please consult a tax specialist before taking advantage of the penalty free scenarios and avoid tax headaches in the process.
CFP Board, a nonprofit regulatory organization, fosters professional standards in personal financial planning so that the public values, has access to and benefits from competent and ethical financial planning. CFP Board owns the certification marks CFP® Certified Financial Planner™ and federally registered CFP (with flame logo), which it awards to individuals who successfully complete initial and ongoing certification requirements. CFP Board currently authorizes more than 50,000 individuals to use these marks in the United States. For more about CFP Board, visit www.CFP.net.
5. Best of the Zacks $100,000 Challenge
Zacks is conducting a nationwide talent search to find the very best stock pickers. The winner gets a $100,000 dream job with Zacks! . Sign up for free to join the competition, or just read what stocks the leading players are trading on the Zacks Challenge Player Blogs.
Here's what the leading players are saying lately:
RebelPOW (Rank #18 with $180,854)
LETTING YOUR PROFITS RUN (PART TWO)
Beris (Rank #43 with $162,469)
SIMPLICITY SWING TRADER: ACCUMULATE IF YOU DARE (GLBC) It is quite obvious that Global Crossing has underperformed markets since April. It dropped big, and it never recovered. Six months later, and Global Crossing is still trying to find its groove (or its pattern, really). And it has been messy. But recently it appears to be kicking somewhat. Chart is messy and there are multiple trends criss-crossing on its path, but now something might be developing, and I thought to just give a few points that one could perhaps consider...
>> JAVA'S MARKET MUSINGS #143 << On Monday the market closed down on all three indices... the losses were of the "garden variety" resulting in another day of consolidation... Looking at the past four days of trading, I note that the market is in a rather tight trading pattern residing at or above the expansion +bar formed last Tuesday post Fed easing... the market continues to consolidate its gains at prices substantially above the steadily inclining 20SMAs... a decline to test the 20SMAs as support would likely be a healthy occurrence for the market...
OTHER TOOLS FROM ZACKS
At the heart of Zacks Investment Research is the Zacks Rank investment philosophy that continues to vastly outperform the market. Our Zacks #1 Ranked (Strong Buys) have produced the following results for investors:
And just as importantly, the Zacks #5 Rank (Strong Sell) List has alerted investors as to which stocks to dump from their portfolios to avoid unnecessary losses.
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Regards and Happy Investing,
Charles Rotblut, CFA
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Zacks Rank performance is the total return (price changes + dividends) of equal weighted portfolios, consisting of those stocks with the indicated Zacks Rank, assuming zero transaction costs. These returns are not the result of a backtest; these are actual returns since 1988. The stocks in the Zacks Rank portfolios were available to Zacks clients before the beginning of each month (monthly rebalancing). Performance results from 1988 through September 2006 are based on a subset of all Zacks Rank stocks that excludes stocks covered by only one analyst and ADRís.
The S&P 500 Index is a well-known, unmanaged index of the prices of 500 large-company common stocks, mainly blue-chip stocks, selected by Standard & Poor's. The S&P 500 Index assumes reinvestment of dividends but does not reflect advisory fees. An investor cannot invest directly in an index.
Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.
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